Question

Judith has \$70 in a savings account that earns 5% interest , compounded annually .

To the nearest cent, how much will she have in 3 years ?

Answer 1

$81.03

Explanation:

Given

`n = 1` --- annually

`t =3` --- time

`r = 5\%` --- rate

`PV = \$70` ---- Present value

Required

The future value

This is calculated as:

`FV = PV * (1 + (r)/(n))^(nt)`

This gives:

`FV = 70 * (1 + (5\%)/(1))^(1*3)`

`FV = 70 * (1 + 5\%)^3`

`FV = 70 * (1.05)^3`

`FV = 70 * 1.157625`

`FV = 81.03375`

The future value to the nearest cent is: $81.03